The salaried class needs relief in the budget

 
Amid the gloom of economic slowdown and global financial crisis, most fixed-income earning employees in the country did not  get any wothwhile raise in their pay packets  this year. But the rising cos

t of living, ever increasing expenses for children’s education and escalating medical expenses have made them significantly poorer in the last 1 year.

It is, therefore, desirable that the Finance Minister provides some financial relief in the forthcoming Union budget to the vast salaried class which is not just heavily taxed but also the best among all classes of taxpayers in terms of tax compliance. Moreover, their tax liability is discharged by the employer by way of tax deduction at source every month.  Keeping this in mind, the KPMG Tax Team has suggested several changes in the personal income tax regime.

Limit to be raised
The basic exemption limit for income tax should be raised to at least Rs 200,000 from the present Rs 150,000 along with the corresponding changes in the limits applicable for women and senior citizens.  The FM must also change the slab rates for calculations of income tax as follows— for annual income upto Rs 250,000 tax should be nil, from Rs 250,001 to Rs 500,000 tax rate can be 10 per cent, from Rs 500,001 to Rs1 lakh 20 per cent and for income above Rs 1 lakh tax should be 30 per cent. The surcharge must be removed altogether.

Remove anomaly
The KPMG Tax Team also recommended that the government reintroduces Standard Deduction of at least Rs 50,000 per annum. This will correct the anomaly because business men and professionals are allowed to claim a deduction in respect of any business expenditure incurred by them.
Given the big rise in the cost of fuel and cost of commuting, the exemption limit for transport allowance provided by the employer could be raised from the paltry sum of Rs 800 per month to at least Rs 2,500 per month.

Similarly, in view of the rising cost of medical treatment, tax exemption for reimbursement of medical expenses may be raised to at least Rs.25,000 per annum, as against Rs. 15,000 allowed currently. Further, the same should not be subjected to Fringe Benefit Tax in the hands of the employer, KPMG said. 

HRA benefit
One of the parameters for determining the amount of house rent allowance (HRA) exemption is 50 per cent of salary in case of Mumbai, Kolkata, Chennai and Delhi and 40 per cent in case of other cities.

However, cities like Bangalore, Pune, and Hyderabad have grown into big metropolitan cities and the cost of living (including rent) has considerably gone up.

In view of this, the limit of HRA exemption should be raised to 50 per cent of salary in case of these cities also. Currently, interest on housing loan on self-occupied property is allowed as a deduction up to Rs1.5 lakhs. But this amount of deduction is grossly inadequate at a time when a small apartment in metro cities costs at least Rs 30 lakhs and the interest rates charged by banks are relatively high in India. KPMG Tax Team suggested that the quantum of deduction should be increased to at least Rs 3 lakhs per annum.